Paper: Is Google Search Behavior Related to Volatility? Incorporating Google Trends Data into a GARCH Model for Equity Volatility

From Timothy de Silva at Claremont McKenna College: Is Google Search Behavior Related to Volatility? Incorporating Google Trends Data into a GARCH Model for Equity Volatility. “Intuitively, one would expect that internet search volume would contain valuable information about investor sentiment for a company. With the development of new data sources, such as Google Trends, this relationship can be more easily and objectively examined. This paper seeks to examine the relationship between a company’s stock price volatility and its Google search volume. A small cross-section of twenty companies is considered, and the goal of this paper is to demonstrate the power of Google Trends data in hope of initiating further research. Using a conventional GARCH framework for financial market volatility, an economically and statistically significant contemporaneous relationship between Google search volume and equity volatility is found.”